Shell plc (NYSE:SHEL) Q4 2023 Earnings Call Transcript February 1, 2024

Shell plc beats earnings expectations. Reported EPS is $2.15, expectations were $1.94. Shell plc isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to Shell's Fourth Quarter and Full Year 2023 Financial Results Announcement. Shell's CEO, Wael Sawan; and CFO, Sinead Gorman will present the results, then host a Q&A session. [Operator Instructions]. We will now begin the presentation.

Wael Sawan: Welcome, everyone. Today, Sinead and I will present to you the 2023 Fourth quarter and Full year results. We had another year of very strong performance, delivering the second highest cash flow from operations in Shell's history despite the external uncertainty and volatility. Starting with safety, which remains our top priority. Our personal safety results last year were slightly lower than in 2022, and our teams are determined to make sure 2024 is a year of improvement. I am, however, really pleased that our safety results set a new record for Shell, confirming our top-tier performance in the industry. We are also making good progress across the targets outlined at our Capital Markets Day and expect more to come as we progress through 2024 and beyond.

In 2023, we demonstrated our strong commitment to capital discipline by delivering at the lower end of our $23 billion to $27 billion range. In addition, we have already achieved $1 billion in structural cost reductions, well on our way to a reduction of $2 billion to $3 billion by 2025. This reduction is a first step, this is not a one-off change program. We are building the capability to continuously adapt to changes through the energy transition. The reductions will be staggered. The most significant contribution in the short term comes from focusing on where we play, which are essentially portfolio choices. And at the same time, we are emphasizing a bottom-up focus to create a leaner more agile organization that delivers more value. We are also leveraging new technologies such as artificial intelligence to improve the performance of our assets.

We have millions of sensors collecting over 5 trillion rows of data that our AI models, combined with our conventional models used to monitor equipment 24 hours a day, 7 days a week, alerting engineers to anomalies from a distance. This enables us to intervene and fix issues early, improving our performance, and we continue to high-grade our portfolio and position the company for growth into the future. This past month, we agreed to sell our Nigerian onshore subsidiary, SPDC, subject to government approvals and other conditions. This is an important step for the company, and we hope to complete the deal as soon as is possible. In 2023, we saw production growth with the startup of a number of key new projects in our advantaged upstream business.

The projects which came on stream this past year at their peak, will add over 200,000 barrels of oil equivalent a day. They are part of our larger funnel set for start-up by 2025. Together at their peak, all projects will add more than 0.5 million barrels of oil equivalent a day to our production. And they will enable us to continue providing the energy security that the world needs while delivering cash flow longevity into the future. We also continue to invest to help enable the energy transition in areas where we can create value. Last year, we invested $5.6 billion in low-carbon energy, such as our Nature Energy acquisition and the CrossWind JV, which will supply renewable power to Holland Hydrogen I, Europe's largest electrolyzer. In short, we're working hard to deliver the energy the world needs today and we're helping to build the energy system of the future.

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